Airline Lobbyists Warn That EU Emissions Plan Would Devastate Profit

James Kanter On Dec 14, 2006
Source: The International Herald Tribune

Raising the stakes in a landmark battle over tackling climate change, the airline industry's main lobbying group said Tuesday that plans by the European Union to cap aircraft emissions would cancel out the profits of European carriers, and it sought to move the debate to the United Nations.

Giovanni Bisignani, the director general of the International Air Transport Association, said the EU proposal would cost airlines around the world €3 billion, or $4 billion, a year to buy emissions allowances and would be "devastating" to European competitiveness in the sector. "This is a shocking number for an industry that has done so much to repair itself in recent years," he said.

Most airlines and the U.S. government want the International Civil Aviation Organization, a UN agency, to draw up any rules for emissions trading so that all countries comply. Talks are set to begin at the organization in September next year. But a global agreement would probably take a long time to achieve, so Europeans are pushing with their own plans that would likely go into effect early in the next decade.

Barbara Helfferich, a spokeswoman for the EU environment commissioner, Stavros Dimas, did not comment on the air transport association's calculations. But she said an EU tally showed that passengers could pay up to €9 more for each round-trip ticket if airlines passed on the costs to consumers.

"The price tag to fight climate change and to offset pollution by airlines is reasonable," she said, adding, "This will not kill the airlines."

Foreign-based carriers serving high- traffic destinations like London, Paris and Frankfurt would be required to operate under the new rules. If other countries introduce similar measures, the EU will drop its jurisdiction over the return flight.

The plans mirror an existing carbon credit trading system that Europe uses to combat global warming and meet emissions targets under the Kyoto Protocol. Airlines are exempt from paying tax on their fuel, called kerosene, and EU officials say that gives them a cost advantage over all other forms of transportation.

Dimas is expected to propose a final draft of the legislation Dec. 20 to the European Commission. But heavy lobbying by the airline industry or a split among the 25 European commissioners could mean delays.

According to calculations by the air transport group, European carriers alone would face charges of about €1.8 billion each year, equal to their projected profits in 2006. Total costs of the plan to the industry could rise over the next decade as Europe increases the number of permits airlines must buy, and as airlines add flights. An economist at the group calculated the costs by estimating the amount of emissions the industry would produce in 2011 at a cost of €30 for each ton. The price of a ton of carbon is currently about €9.

Bisignani, the group's director, said the industry was already highly competitive on fares despite higher fuel costs, meaning that airlines would bear the brunt of costs.

But Richard Aboulafia, of the aviation consultancy Teal Group in Virginia, said airlines were likely to be able to pass some costs of emissions allowances to the traveling public.

He added, however, that "there's real danger here for the airlines of death by a thousand cuts" as carriers installed costly new safety equipment and pay for other environmental improvements.

In the meantime, the International Air Transport Association is pushing for the creation of a single European air traffic control organization, which it argues would improve coordination between airports and cut the amount of time that aircraft burn fuel during flights and in holding patterns.

Bisignani also said that orders for fuel-efficient jets showed that the industry was "going green" without the need for government intervention.

Air transport currently represents about 2 percent of global carbon dioxide emissions, and that figure should rise to about 3 percent by 2050. Cars represent a far larger problem, creating about 18 percent of carbon emissions worldwide. But the EU and environmentalists say that aircraft flying in the skies release more harmful pollutants than cars.